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Real-Time Tests of the Leading Economic Index: Do Changes in the Index Composition Matter?

Robert McGuckin and Ataman Ozyildirim ()
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Robert McGuckin: The Conference Board

No 03-04, Economics Program Working Papers from The Conference Board, Economics Program

Abstract: This paper reports real-time out-of-sample tests of the ability of the U.S. Index Leading Economic Indicators (LEI) to forecast the economy using "composition-changing" "as-published" versions of the LEI. It is an extension of recent work that focused on forecasts with a "composition-constant" LEI. The results demonstrate that the LEI helps forecasts and compositional change in the LEI does not account for poor real-time out-of-sample forecast performance found in earlier work. Reviews of the historical record reinforce the findings.

Keywords: Business cycle; Indicators; Leading index; Times series; Forecasting (search for similar items in EconPapers)
JEL-codes: E32 C52 C53 C22 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2003-06
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Published in Journal of Business Cycle Measurement and Analysis, Vol. 1, No. 2, June 2004, pages 171-92.

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http://www.conference-board.org/economics/workingpapers.cfm?pdf=E-0012-03-WP First version, 2003 (application/pdf)

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